Month: May 2019

Cattle Yo-Yo goes back up

Posted on by Caitlin Dearden

Post drought cattle prices are inherently volatile. This is especially so for young cattle. This week we saw the Eastern Young Cattle Indicator (EYCI) yo yo bounce back up in the first full week of trading for three.

The forecast rain seems to have come to fruition for key cattle areas of NSW and Victoria. Remarkably, so it would seem, parts of Western NSW are getting their second bought of rain within 10 days.

It’s hard to judge how supply is travelling. Usually supply increases after Easter, as pent up cattle from short weeks hits the market. This week EYCI yardings were stronger (figure 1), but well below pre-Easter levels, and below the five year average.

Demand seems to have been stronger this week. Figure 2 shows the EYCI rallying back towards April highs, and last year’s levels. The question will be whether the rally can be sustained.

The most expensive cattle this week were Trade Steers in SA, at the very healthy 571¢/kg cwt, followed by Heavy Steers in Victoria and Trade Steer in NSW, both at 556¢/kg cwt. Heavy steer prices are just 10¢ off a record level for this time of year. Grassfed finished cattle supplies are tightening, and we’re still a month off winter.

Meat and Livestock Australia’s (MLA) industry projection update was released yesterday, and the forecasts are a little scary for processors. MLA expect a 10% fall in cattle slaughter next year, and remain low into 2021. More on this next week.

What does it mean/next week?:

Figure 3 shows the rain forecast for the coming week, which is likely to add to demand and take from supply. Tightening supply of finished cattle will add to upward pressure, so the target might be moving. The 90CL Export price this week hit 690¢, so there seems to be plenty of room for cattle prices to move upwards.

 

 

Pluviophile’s delight

Posted on by Caitlin Dearden

Pluviophile – A lover of rain; someone who finds joy and peace of mind during rainy days. The rain has teased in recent months, however this week it has delivered to many in need – and the market has reacted.

After months of dry weather we finally see a rainfall event in the east that provides. In the animated map, we can see that large swathes of New South Wales and Victoria have received an opening break, with many receiving >50mm over the two days.

There are some who missed out on the rainfall, however there is still plenty of time to go.

In recent weeks there had been concerns that the rain was never going to eventuate, with ASX futures rising A$20 since the start of April. As we all know prices move when the rain arrives, and the market followed the forecast.

In figure 1, ASX wheat for Jan 2020 is shown since the start of the year. In the past week, the contract has fallen 7% or A$25. The contract is now at its lowest level since April/May last year.

The market now has confidence in the crop, it will quickly revert if rainfall is not forthcoming over the next three months. The crop is not yet made, but in Victoria and parts of New South Wales it is off the starting block.

In September last year, I proposed a strategy of selling ASX (see here), which would have provided a return of A$68/mt. At current levels of A$313, many consumers are considering taking some cover, as memories of the prior years’ levels are fresh in mind.

On another note, If you are looking for something to listen to whilst seeding – give our podcast a shot:
Click here

What does it mean/next week?:

The overseas markets have stabilized over the past week, and it is likely that we will see short speculators start to take profits.

I don’t expect old crop to lose a huge amount of value due to the lack of available supply, however new crop is liable to come under further pressure as buyers pull the brakes.

Shearing worries spark buyer enthusiasm

Posted on by Caitlin Dearden

The quantity of bales offered for sale this week was sizeable due to accumulation over the Easter recess period. However, that didn’t lead to softened demand. AWEX reported that brokers are talking about sharp declines in shearing activity and this has done well to ignite buyer activity.

The Eastern Market Indicator (EMI) gained a nice 17 cents on the week to close at 1,960 cents. The US$ has moved broadly higher this week and as a result, the AU$ has been collateral damage dipping below 70 cents during the week but finishing at US $0.702. The EMI in US$ terms fell by 21 cents to end the week at 1,376 US cents (Table 1).

The Western Market Indicator (WMI) found strength like its eastern counterpart, lifting 28 cents to 2,093 cents.

The increased offering this week saw 43,053 bales come to market. Growers were more satisfied with the market levels than prior to the recess with just 6.4% of the offering passed in. This meant 40, 290 bales were cleared to the trade. In the auction weeks since the winter recess, 1,235,391 bales have been cleared to the trade, 223,644 fewer than the same period last year. The average shortfall cleared to the trade compared to the same time last year now sits at 6389 bales per week fewer.

The dollar value for the week was $82.9 million for a combined value of $2.848 billion so far this season. A simple calculation of $ value divided by bales sold gives us $2,058 per bale across all types for the week.

All MPG’s lifted in this weeks market but reports are still indicating a lack of support for lesser style wools. Crossbreds have continued the running streak, gaining another 40 cents to 60 for 28 micron. While Cardings have been slipping for the last six weeks, this weeks strength has supported a lift in the range of 10 to 25 cents for the cardings indicator.

The week ahead

The roster for the next few weeks reflects the predicted drop in availability of fresh wool. Next week just 33,464 bales are rostered for sale with all centres selling on Wednesday and Thursday. The following weeks 34,445 and 30,719 bales are currently forecast on offer.

Weekly wool forwards for week ending 3rd May 2019

Posted on by Caitlin Dearden

The forwards market has been quiet again the last fortnight. We had the Easter break last week, so that’s not unusual, but we had just as few agreements this week as then.

Last week, one trade was dealt for 21 Micron wool, agreeing on a price of 2,250¢ for July, the same price as the June agreements from the week before. The other trade was for 28 Micron wool, agreeing at 1,030¢ for November.

This week, both trades were for 21 Micron wool, one for June at 2,250¢ and the other for October at 2,125¢. The forwards curve is still looking pretty flat, so we don’t expect to see a lot of movement in prices for some time.

Supply disruptions and Merino moves

Posted on by Caitlin Dearden

Over a couple of weeks of supply disruptions, lamb and sheep markets have largely been treading water. There have, however, been some interesting moves in the Merino lamb category, if not in the prime lamb space.

Lamb slaughter rates plummeted last week as Good Friday took out a day’s slaughter and probably any Saturday morning shifts as well. Lamb slaughter was down 25%, which is obviously more than one day’s slaughter, so perhaps things are starting to tighten.

Sheep slaughter was down before Easter, having lost 32% since the last week in March. Good Friday only took out a further 4% (Figure 1), so there might have been a bit of a shift back to sheep.

Lamb and mutton markets were largely steady this week, with the Eastern States Trade Lamb Indicator (ESTLI) down 5¢ to 721¢/kg cwt and the East Coast Mutton Indicator losing 5¢ to 506¢/kg cwt.

The only real movement in the east coast indicators this week came from Merino Lambs. Figure 2 shows the East Coast Merino Lamb Indicator stopped just under 700¢ at 692¢/kg cwt. Merino lambs saw a gain of 29¢ and sit 160¢ above the same time last year. We are probably seeing tighter supply from the ordinary season, combined with stronger demand for Merino producers looking to restock.

There has been some good rain in western NSW this week, which while not drought-breaking, is the best they’ve had for some time. There might not be many sheep left out there but it can only be good for demand.

Next week?:

Next week will get back to more normal supply with full weeks resuming. There is still no real rain on the forecast but the recent move in sheep supply might be a pointer to what is to come, for both sheep and lambs.  Forward prices are starting to move towards 800¢ for June and July, but will it be enough?